Tax burden cripples Pa. economy

HARRISBURG — Pennsylvania's tax burden continues to hurt the state's economic competitiveness, according to a new report from the American Legislative Exchange Council, or ALEC.

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By Darwyyn Deyo

poconorecord.com

By Darwyyn Deyo

Posted Jun. 22, 2011 at 12:01 AM

By Darwyyn Deyo

Posted Jun. 22, 2011 at 12:01 AM

» Social News

HARRISBURG — Pennsylvania's tax burden continues to hurt the state's economic competitiveness, according to a new report from the American Legislative Exchange Council, or ALEC.

The annual "Rich States, Poor States" report ranks states nationwide based on 15 factors of economic competitiveness, including tax burden, minimum wage and tort and liability reform, with a rank of 1 as best.

According to the report, Pennsylvania has fallen in economic competitiveness two years in a row, from 36th to 43rd position. The state ranks even lower in economic performance, coming in at 46th position, due to reductions in personal income per capita, non-farm payroll employment and increased outmigration from the state.

Gene Barr, vice president of government affairs for the Pennsylvania Chamber of Business and Industry, which advocates for businesses, said Monday that the findings of the report were "not a shock."

"We haven't done nearly enough (of) what we need to do. At best, Pennsylvania keeps in the same place," said Barr. "The Marcellus (shale) development presents a real opportunity, but we can't assume it's going to happen. We need to cultivate that particular industry and make sure we continue to diversify."

Antony Davies, professor of economics at Duquesne University, said the report highlighted the problem of Americans thinking of businesses as large corporations, when in fact most business are small or medium-sized.

"The harder they (state governments) make it, both in taxes and in regulations for entrepreneurs "¦ the more likely they're going to be to throw up their hands and say it's easier to work for somebody else," Davies said. "Every time an entrepreneur does that, we lose jobs."

Davies described Pennsylvania's outmigration problem — ranked 41st in the country — as a symptom of increasing property taxes, which along with increased income taxes, affects where young college graduates chose to move and live.

"They can go anywhere they want, so of course the states that are going to attract them on average are states with lower property taxes," Davies said.

Pennsylvania ranks 30th nationwide for property tax burden, a tax which takes $32.55 for every $1,000 of personal income, according to the report.

Sharon Ward, director of the Pennsylvania Budget and Policy Center, a Harrisburg-based research nonprofit, said the outmigration identified in the ALEC report is due to housing costs, not taxes.

"The people leaving New York, New Jersey and other states are low-income people, not high-income people," said Ward. "The lower-income folks tend to get priced out of the housing market. Much of the population growth in the eastern part of (Pennsylvania) is low- to moderate-income people from New York and New Jersey, not high-rollers."

The relationship between increased taxes and outmigration also was emphasized by the authors of the "Rich States, Poor States" report.

"States without income taxes just clearly do better," said Moore, "and we see that year (after) year."